Japan’s economy expanded by a slower-than-expected 2.4% (y-o-y) in Q3, according to the second estimate released on our survey deadline. This downgrade, which compared with a preliminary estimate of 2.6% (y-o-y), accompanied a sharp downward revision to 2012 GDP growth from 1.9% (y-o-y) to 1.4%. In q-o-q terms, activity slowed to 0.3% in Q3, from 0.9% in Q2, but according to our panel, GDP growth is expected to pick up in Q4, thanks to a rush in demand ahead of the April 2014 consumption tax hike (see page 3). Indeed, economic indicators heading into Q4 support this view. November’s PMI, for instance, grew by 55.1, up from October’s 54.2 expansion, while October’s industrial production rose for the second straight month by 0.5% (m-o-m) and October consumer price inflation edged up by 0.3% (y-o-y). With both the latest Q3 data and monthly indicators going into Q4 in mind, our panel reckons that growth could accelerate this year.
Over the past year, Prime Minister Abe has overseen massive monetary and fiscal stimulus which has resulted in positive growth over recent quarters. Yet, with the sales tax increase scheduled for next April, many fear this could hamper consumer spending and weigh on overall activity, reducing growth back to usual lacklustre rates of advance. Accordingly, in order to mitigate the expected drag on the economy, a spending package amounting to ¥5.5tn was approved by the government early this month. The measures include the promotion of capital investment by enterprises for the Tokyo 2020 Summer Olympic Games, steps to create jobs for young people and women, and funding for ongoing reconstruction after the March 2011 earthquake.
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